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Yes your assumption of setting the control file path in the initSID.ora is a correct way to do. For how to create a database, please refer the createdb.sql script normally found under $ORACLE_HOME/rdbms/admin

Hi,
Normally all the static parmaters are kept in config.ora file.We can also set the control_files parameter in init.ora file but since we dont change this parameter most often we set this in config.ora
Normally the config.ora file is found in $ORACLE_HOME/dbs sirectory.
In case of any help please be free to ask me at rohitsn@altavista.com